Asian Stocks Eye Early Gains as Rate Cut Bets Firm: Markets Wrap

(Bloomberg) — Asian stocks gained on Monday, as a softer reading of the Federal Reserve’s preferred measure for inflation bolstered rate-cut hopes.

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Equities in Australia, Japan and Hong Kong advanced. India’s stock futures jumped as exit polls indicated a resounding victory for Prime Minister Narendra Modi’s party. Mainland Chinese equities fell.

The gains in Asian shares have been shored up by a weaker dollar in recent weeks as investors hope the Federal Reserve will finally begin to ease policy. The greenback declined 1.1% in May, the first monthly drop this year.

On Friday, the Fed’s preferred measure of inflation, core personal consumption expenditures, posted the smallest increase this year. But politics may inject volatility, with tensions surrounding the Middle East and the US election simmering.

“We are starting to see some softer data come out” in the US, Naomi Fink, a strategist at Nikko Asset Management, said on Bloomberg Television. “If we can kind of see a gradual disinflation then I think we will probably have a pretty good outcome for global markets.”

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Oil rose. Australian bond yields edged lower, as did those for 10-year Treasuries.

“While this is unlikely to be enough to justify an imminent Fed rate cut, we think recent data continue to underpin our base case soft landing scenario,” Solita Marcelli, chief investment officer for the Americas at UBS Group AG’s wealth management unit, wrote in a note. “This should allow the US central bank to start policy easing later this year, most likely at its September meeting, in our view.”

Read More: Key Engines of US Consumer Spending Are Losing Steam All at Once

Meantime, Saudi Aramco’s $12 billion share sale sold out shortly after the deal opened on Sunday, in a boon to the government that’s seeking funds to help pay for a massive economic transformation plan. While it wasn’t immediately clear how much of the demand came from overseas, the order book reflected a mix of local and foreign investors, people familiar with the matter told Bloomberg News.

In Mexico, polling stations have closed, and two media outlets projected a win for Claudia Sheinbaum, running for ruling party Morena on a platform of continuity.

Story continues

This week, traders will be closely watching inflation prints across emerging markets including Indonesia, South Korea and Chile, as well as growth data in Australia and Europe. The European Central Bank may open the door to a weaker euro on Thursday as its first interest-rate cut of the cycle. A US jobs report is released on Friday.

Some key events this week:

• China Caixin manufacturing PMI, Monday

• Indonesia CPI, Monday

• India S&P Global Manufacturing PMI, Monday

• Eurozone S&P Global Manufacturing PMI, Monday

• UK S&P Global / CIPS Manufacturing PMI, Monday

• US construction spending, ISM Manufacturing, Monday

• International Atomic Energy Agency board meets in Vienna, Monday

• South Korea CPI, Tuesday

• Germany unemployment, Tuesday

• South Africa GDP, Tuesday

• Brazil GDP, Tuesday

• US factory orders, JOLTS, Tuesday

• Australia GDP, Wednesday

• South Korea GDP, Wednesday

• China Caixin services PMI, Wednesday

• Eurozone S&P Global Services PMI, PPI, Wednesday

• Canada rate decision, Wednesday

• Eurozone retail sales, ECB rate decision, Thursday

• China trade, forex reserves, Friday

• Eurozone GDP, Friday

• Mexico CPI, Friday

• Chile copper exports, trade, CPI, Friday

• US unemployment rate, nonfarm payrolls, wholesale inventories, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.2% as of 10:31 a.m. Tokyo time

• Nikkei 225 futures (OSE) rose 1.1%

• Japan’s Topix rose 1%

• Australia’s S&P/ASX 200 rose 0.8%

• Hong Kong’s Hang Seng rose 1.4%

• The Shanghai Composite fell 0.2%

• Euro Stoxx 50 futures rose 1%

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%

• The euro was little changed at $1.0855

• The Japanese yen rose 0.1% to 157.12 per dollar

• The offshore yuan was little changed at 7.2613 per dollar

Cryptocurrencies

• Bitcoin rose 0.6% to $68,207.12

• Ether rose 0.3% to $3,795.89

Bonds

Commodities

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Matthew Burgess.

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